Cabinet Office v Beavan & Ors

An incorporated collective pay agreement must be construed objectively in its factual and industrial context. Industrial common sense may assist in choosing between available constructions.

A time-limited general pay award does not, without clear wording, necessarily limit a separately agreed structural change to pay progression. Where an agreement introduces guaranteed progression points and contains no express temporal limit for them, the points may continue after the period of the general pay award. A subsequent pay freeze does not itself remove that contractual entitlement.

Three Cabinet Office employees brought claims for unlawful deductions from wages under section 13(1) of the Employment Rights Act 1996. They contended that a 2008 pay offer, incorporated into their individual contracts, entitled them to guaranteed pay-progression increases after a public-sector pay freeze began in August 2010.

The Employment Tribunal at Norwich upheld the claims. The Cabinet Office appealed, submitting that the 2008 offer was confined to a two-year pay settlement and that the progression arrangements ended with it. The central issue was the proper construction of the incorporated pay agreement.

1. Appeal dismissed. The Employment Tribunal correctly held that the claimants had a contractual entitlement to the relevant progression increases. Their non-payment therefore constituted unlawful deductions from wages under section 13(1) of the Employment Rights Act 1996.

2. The incorporated pay offer had to be construed objectively, in its factual and industrial setting. The agreement dealt with two distinct subjects: a general pay increase confined to 2008 and 2009, and a structural introduction of guaranteed progression points within the pay bands.

3. The latter structural arrangement was not limited to the two-year period. Its purpose included improving progression and addressing concerns identified by the Equal Pay Audit. The provision that the eight-year point would operate after the 2009 settlement, together with the absence of an express time limit, supported that construction.

4. There was no necessary contractual connection between continuation of a general pay award and continuation of an agreed structural term. An employer could not unilaterally remove a fundamental contractual change merely because there was no later pay increase, subject to any relevant statutory or other legal power not at issue.

5. The Cabinet Office's reliance on Treasury constraints, alleged unfairness and alleged instability did not justify a different construction. An enduring incremental structure was neither absurd nor unworkable and was capable of promoting stability for both employer and employees.

• Employment Appeal Tribunal: dismissed the Cabinet Office's appeal and upheld the Employment Tribunal's determination that the claimants had suffered unlawful deductions from wages.
• Employment Tribunal at Norwich: allowed the three employees' claims in a decision sent to the parties on 14 January 2013.